The Palestinian sector is set to rely increasingly on electronic payments, moving away from physical bank notes as a means to deal with the banking crisis, Deputy Governor of the Palestinian Monetary Authority (PMA) Mohammad Manasra told the PA-run WAFA on Sunday.
The move is part of a multi-track path to deal with the financial crisis partially attributed to Israeli restrictions on the transfer of surplus cash, he said. Under the current restrictions, Palestinian banks can only return physical currency through Bank Hapoalim and Israel Discount Bank with a cap of NIS 18 billion annually.
Palestinian economist Mohammed Samhouri has repeatedly published that such a ceiling barely reaches half the necessary levels, creating an economic crisis.
The exchange depends heavily on the banks receiving a letter of indemnity and immunity, which protects them should there be accusations of money laundering. The letters, issued by Israel’s Finance Ministry, have been repeatedly obstructed in recent years.
According to the research organization Arab Center Washington DC, the accumulation of shekels in Palestinian banks has reached unsustainable levels, which threatens the banking system’s capacity to finance trade with Israel. In 2024, more than half of Palestinian Authority imports and more than 80% of its exports were with Israel.
Palestinian economy misrepresented
Such a ceiling, however, does not reflect the current size of the Palestinian economy. Consequently, the Palestinian banks are replete with surplus shekels cash that they cannot transfer to replenish their correspondent accounts with Israeli banks – accounts which are essential for conducting cross-border trade with Israel. Currently, the accumulation of shekels in Palestinian banks has reached unsustainable levels, threatening the banking system’s capacity to finance trade with Israel.
The consequence, according to the WAFA interview, is that banks have begun refusing to accept shekel deposits, which has created economic hardship for both individuals and businesses.
Manasra asserted that a new law introduced to reduce cash transactions is in place to build a stronger economy, not to burden civilians, and that comprehensive implementation of the law would follow a fully integrated electronic payments infrastructure. The implementation of the law is expected to be introduced over a two-year period.
The PMA official added that talks were being held with the Bank of Israel and an international partner to see the NIS 18 billion cap raised, though responsibility for the issue was transferred to the Israeli government in October 2023.